Oriental Rise Holdings Ltd (ORISF) Risk Analysis

The Cayman Islands introduced the International Tax Co-operation (Economic Substance) Act (the "Substance Act") effective from January 1, 2019, which established certain economic substance requirements for in-scope Cayman Islands entities which are engaged in certain "relevant activities," which in the case of exempted companies incorporated before January 1, 2019, will apply in respect of financial years commencing July 1, 2019, onwards. As we are a Cayman Islands company, compliance obligations include filing annual notifications for the Company, which need to state whether we are carrying out any relevant activities and if so, whether we have satisfied economic substance tests to the extent required under the Substance Act. As it is a new regime, it is anticipated that the Substance Act will evolve and be subject to further clarification and amendments. We may need to allocate additional resources to keep updated with these developments, and may have to make changes to our operations in order to comply with all requirements under the Substance Act. Failure to satisfy these requirements may subject us to penalties under the Substance Act.

We conduct our core business in China, and we are required by the PRC labor laws and regulations to pay various statutory employee benefits, including pensions insurance, medical insurance, work-related injury insurance, unemployment insurance, maternity insurance, and housing provident fund, to designated government agencies for the benefit of our employees. In October 2010, the SCNPC promulgated the Social Insurance Law of PRC (the "PRC Social Insurance Law"), effective on July 1, 2011, and amended it on December 29, 2018. According to the PRC Social Insurance Law, employers shall make full contributions to the social insurance fund in a timely manner, failing which the employers may be ordered by the competent authority to make full payments within a prescribed period, and the employers may also be subject to late payment fees and fines in an amount more than the outstanding fees but not exceeding three times the outstanding fees. On April 3, 1999, the State Council promulgated the Regulations on the Administration of Housing Provident Fund (the "PRC Housing Provident Fund Regulations"), which was amended on March 24, 2002, and March 24, 2019. Pursuant to the PRC Housing Provident Fund Regulations, employers shall make full contributions to the housing provident fund in a timely manner, failing which the competent authority may order the employers to make full payments for the housing provident fund within a prescribed period, otherwise the competent authority may apply to the court for enforcement. On May 30, 2003, the Ministry of Labor and Social Security (dissolved) issued the Opinions of the Ministry of Labor and Social Security on Several Matters in Relation to Employment of Part-Time Workers, which provide that an employer shall make contributions to the work-related injury insurance fund for part-time workers. According to the Regulation on Work-Related Injury Insurance which was promulgated by the State Council on April 27, 2003 with the latest amendment taking effect on January 1, 2011, if an employer fails to make contributions to the work-related injury insurance fund in compliance with applicable laws and regulations, it may be ordered by the competent authority to make full payments within a prescribed period, and the employers may also be subject to late payment fees at the rate of 0.05% of the outstanding amount per day and fines in an amount more than the outstanding fees but not exceeding three times the outstanding fees. We have not previously made full contributions to the social insurance fund and the housing provident funds for our employees in compliance with the provisions of the Social Insurance Law and the Administrative Regulations on Housing Provident Funds of the PRC, and we also did not make any contribution to the social insurance fund and the housing provident funds for some of our employees in compliance with applicable PRC laws and regulations, as a result of which we may be subject to orders by competent labor authorities for rectification, late payment fees, fines up to three times the outstanding fees and/or other penalties. As of the date of this annual report, we are still not in compliance with such funding requirements and the approximate amount of the shortfalls in the Company's required contributions is US$150,000 (RMB 1.08 million). Furthermore, we cannot assure you that our employees who have consented to not contribute to the social insurance fund or the housing provident fund will not lodge complaints with the relevant authorities against us in respect of our failure to make contribution to the social insurance fund or the housing provident fund or initiate a claim against or disputes with us. If the relevant authorities impose any fine or penalty on us for our non-compliance, or demand that we take any remedial steps which may lead to the incurrence of substantial expenses, our financial condition and results may be materially and adversely affected. In addition, in the event that the relevant authorities later strengthen the enforcement of the relevant laws and regulations on social insurance and housing provident funds in respect of the enterprises within its jurisdiction and accordingly considers it necessary to make retrospective contribution to social insurance and housing provident fund contributions, or if provisions are required to be made, the amount of which may be significant, our business, financial condition and results of operation may be materially and adversely affected.

According to the Food Safety Law of the PRC (the "PRC Food Safety Law"), which took effect on February 28, 2009 and was last amended on April 29, 2021, the packages of pre-packed food shall indicate the name, address and contact of the manufacturer, the expiry date, the production permit code, etc., failing which the manufacturers or entities engaged in sale of such food may be subject to penalties including but not limited to confiscation of relevant income, the food produced, the tools, equipment, raw materials, and other items used for illegal production or trade, suspension of business, revocation of permits and imposition of fines not less than RMB5,000 but not more than RMB50,000 if the goods value of the food illegally produced is less than RMB10,000 or a fine of not less than five times but not more than ten times the goods value if the goods value is no less than RMB10,000. Fujian MDH is engaged in sale of refined tea and also produced refined tea before the expiration of its food production license. However, the packages of the products sold or produced by Fujian MDH fail to indicate the above-mentioned information as required by the PRC Food Safety Law, as a result of which we may be subject to penalties including but not limited to confiscation of relevant income, the food produced, the tools, equipment, raw materials, and other items used for illegal production or trade, imposition of fines up to ten times the value of goods such produced or sold, suspension of business, and revocation of permits. While as of the date of this annual report, Fujian MDH has not been punished for the above-mentioned non-compliance nor have Fujian MDH received any notice from competent authority that any penalties are likely to be imposed, it is still likely that competent authorities may impose penalties on Fujian MDH with respect to its non-compliance with applicable labelling requirements, with the anticipated fines Fujian MDH may be subject to ranging from RMB5,000 to ten times the value of goods such produced or sold. On March 7, 2023, Fujian MDH obtained a new food production license, which remains valid from March 7, 2023, to March 6, 2028. The company has now come into compliance with the applicable labelling requirements of the PRC Food Safety Law.

According to the Land Administration Law of the PRC (the "Land Administration Law"), which was promulgated by the SCNPC on June 25, 1986, effective since January 1987 and was last amended on August 26, 2019, the state implements a land-use control system. The state formulates the general plan for land use, specifies the land use, and divides the land into agricultural land, construction land and unused land. Agricultural land refers to the land directly used for agricultural production, including cultivated land, forest land, and grassland. Construction land refers to land on which buildings and structures are constructed. If any construction involves occupation of agricultural land, the statutory procedures shall be completed for conversion of the agricultural land into construction land before commencing the construction, failing which the competent authority may order to dismantle the buildings or other facilities illegally built on the land, and a fine may be imposed. It is required under the PRC law to obtain relevant permits from different authorities before commencing the construction of a building. The required permits include, inter alia, a Land Use Certificate, a Planning Permit of Land for Construction Use, a Planning Permit of Construction Project, and a Commencement Permit of Construction Project. After the completion of construction, an examination of completion by the experts must be organized and the construction enterprise must submit an application to the competent government department at or above county level where the project is located for examination upon completion of building for filing purposes. Further, pursuant to relevant PRC laws and regulations, the premises title certificate is the only legal certificate by which the owner legally has the ownership in respect of the building and thereby exercises rights to possess, utilize, profit from and dispose of the premises. According to the Urban and Rural Planning Law of the People's Republic of China, if a rural construction planning permit is not obtained in accordance with the law or construction is not carried out in accordance with the provisions of the rural construction planning permit, the township or town people's government shall order the construction to stop and make corrections within a time limit. The buildings we use for our production are constructed on the facility agricultural land which is deemed as agricultural land under the Land Administration Law and title certificates will not be issued with respect to constructions on the facility agricultural land under the PRC laws. According to the 2014 Notice and the 2019 Notice, the permitted use of facility agricultural land does not require the conversion of the agricultural land into construction land according to the Land Administration Law or permissions such as the Planning Permit of Land for Construction Use, the Planning Permit of Construction Project, or the Commencement Permit of Construction Project before construction. Nevertheless, If the buildings we thus constructed exceed the permitted use of the facility agricultural land according to the 2014 Notice and the 2019 Notice, such buildings may be identified as illegal buildings, and the competent authority may order us to dismantle the buildings and impose fines on us, which could materially and adversely affect our business, results of operations and financial condition.

According to the Notice of the Ministry of Land and Resources and the Ministry of Agriculture on Further Supporting the Healthy Development of Facility Agriculture (the "2014 Notice'') promulgated on and effective since September 29, 2014, the facility agricultural land (which is defined as the agricultural land that is directly used for the production facilities, ancillary facilities and supporting facilities served in agricultural production) is governed by the 2014 Notice. The 2014 Notice provides that since facility agricultural lands' nature belongs to agricultural land, it is administrated in accordance with the administration of agricultural land and no examination and approval procedures for the conversion of agricultural land is required. When the land concerned no longer functions as facility agricultural land, the grantor shall reclaim the land in accordance with relevant regulations, and the occupied cultivated land shall be reclaimed as cultivated land. On December 17, 2019, the Ministry of Natural Resources and the Ministry of Agriculture and Rural Affairs promulgated the Notice of the Ministry of Natural Resources and the Ministry of Agriculture and Rural Affairs on Issues Related to the Management of Facility Agricultural Land Management (the "2019 Notice''), which abolished and replaced the 2014 Notice. The 2019 Notice stipulates that facility agricultural land includes facility land directly used for crop planting, livestock, and poultry aquaculture in agricultural production. We lease one facility agricultural land parcel of approximately 2,267.98 square meters at Houlong Village from the Houlong village committee for tea production purposes, with the lease term beginning on February 1, 2015, and ending on January 31, 2035. We operate our automatic production facilities to process our tea products on the above-mentioned facility agricultural land parcel, which may be found by competent authority exceeding the permitted use of the facility agricultural land as required under the 2019 Notice. The competent authority therefore may order us to remediate, halt production and impose fines on us, which could materially and adversely affect our business, results of operations and financial condition.

According to the Law of the People's Republic of China on the Quality and Safety of Agricultural Products (the "Produce Safety Law") promulgated on April 29, 2006 with the latest amendment made on September 2, 2022, agricultural products processing enterprises, specialized farmers' cooperatives, and socialized agricultural service organizations are required to establish records ("Production Records") relating to the production of agricultural products to faithfully record: (i) the names, sources, usage, and dosage of agricultural inputs used and dates of using and stopping using such agricultural inputs; (ii) the occurrence and prevention and control of animal epidemic diseases, crop diseases and insect pests; (iii) the dates of harvest, slaughter or fishing; records on the production of agricultural products shall be preserved for at least two years. The Produce Safety Law also provides that where an agricultural products processing enterprise, specialized farmers' cooperative, or socialized agricultural service organization fails to establish or preserve the records in accordance with the provisions of the Produce Safety Law, or forges or alters the records, the agriculture and rural affairs department of the local government at or above the county level will order it to remediate within a specified period, failing which may result in imposition of a fine of not less than RMB2,000 but not more than RMB20,000. Since we are engaged in processing tea products which are classified as agricultural products under the Produce Safety Law, we are required to keep Production Records. However, because we did not previously establish proper Production Records in relation to the production of our tea products in accordance with the Produce Safety Law, we may be ordered by the competent authority to remediate within a specified period and may be subject to a fine of not less than RMB2,000 but not more than RMB20,000.

In accordance with the applicable PRC laws and regulations, we are required to obtain licenses and permits for purposes of conducting our business, including but not limited to the business license, the food production license, and the food trade license. In the event any of our licenses and permits are revoked, not renewed, or not extended, we may not be able to carry on the business of food production and processing in mainland China. Our operations have not previously been materially affected due to revocation of our licenses or permits. However, we cannot assure you that any of the above circumstances will not occur in the future, which may materially and adversely affect our business operations, production, and financial performance. In addition, our customers may lose confidence in us, and we may face a decline in the number of orders for our products which in turn could materially and adversely affect our business, results of operations and financial condition.

Pursuant to the PRC Fire Safety Law, which was promulgated by the Standing Committee of the National People's Congress, or the SCNPC on April 29, 1998, amended on October 28, 2008, April 23, 2019, and April 29, 2021, and effective on April 29, 2021, and the Interim Provisions on Administration of Fire Control Design Review and Acceptance of Construction Project by the Ministry of Housing and Urban-Rural Development, which became effective on June 1, 2020 and was amended on August 21, 2023, the construction entity of a large-scale crowded venue (including the construction of a manufacturing plant whose size is over 2,500 square meters) and other special construction projects must apply for fire prevention design review with fire control authorities, and complete fire assessment inspection and acceptance procedures after the construction project is completed. The construction entity of other construction projects must complete the filing for fire prevention design and the fire safety completion inspection and acceptance procedures within five business days after passing the construction completion inspection and acceptance. If the construction entity fails to pass the fire safety inspection before such venue is put into use or fails to conform to the fire safety requirements after such inspection, it will be subject to (i) orders to suspend the construction of projects, use of such projects, or operation of relevant business, and (ii) a fine between RMB30,000 and RMB300,000. We did not conduct the fire safety completion inspection and acceptance procedures after the construction of our production plant was completed as required by the PRC Fire Safety Law, as a result of which we may be subject to (i) orders to suspend the construction of projects, use of such projects, or operation of relevant business, and (ii) a fine between RMB30,000 and RMB300,000.

PRC laws and regulations, such as the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, Anti-Monopoly Law of the PRC and the Rules of the PRC Ministry of Commerce, or the MOFCOM, on Implementation of the Security Review System of Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the MOFCOM Security Review Rules, established additional procedures and requirements that are expected to make merger and acquisition activities in Mainland China by foreign investors more time-consuming and complex, including requirements in some instances that the MOFCOM be notified in advance of any change of control transaction in which a foreign investor takes control of a Mainland China domestic enterprise, or that the approval from the MOFCOM be obtained in circumstances where offshore companies established or controlled by Mainland China enterprises or residents acquire affiliated domestic companies. PRC laws and regulations also require certain merger and acquisition transactions to be subject to merger control review or security review. According to these laws and regulations, a security review is required for mergers and acquisitions by foreign investors having "national defense and security" concerns, and for mergers and acquisitions by which foreign investors may acquire the "de facto control" of domestic enterprises that have "national security" concerns. In addition, when deciding whether a specific merger or acquisition of a domestic enterprise by foreign investors is subject to the security review, the MOFCOM will look into the substance and actual impact of the transaction. The MOFCOM Security Review Rules further prohibit foreign investors from bypassing the security review requirement by structuring transactions through proxies, trusts, indirect investments, leases, loans, control through contractual arrangements or offshore transactions. We might grow our business in part by acquiring other companies operating in our industry. Complying with the requirements of the relevant regulations to complete such transactions could be time-consuming, and any required approval processes, including approval from the MOFCOM, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

The M&A Rules requires an overseas special purpose vehicle formed for listing purposes through acquisitions of mainland China domestic companies and controlled by mainland China companies or individuals to obtain the approval of the CSRC, prior to the listing and trading of such special purpose vehicle's securities on an overseas stock exchange. On September 21, 2006, the CSRC published on its official website procedures regarding its approval of overseas listings by special purpose vehicles. However, we are not certain as to the interpretation and application of the regulations, and any future securities offerings may ultimately require approval from the CSRC under the M&A Rules. If CSRC approval is required under the M&A Rules, it is uncertain whether it would be possible for us to obtain the approval and any failure to obtain or delay in obtaining CSRC approval for any future securities offerings would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies. While the application of the M&A Rules remains unclear, we believe that the CSRC approval under the M&A Rules were not required for the listing and trading of our Ordinary Shares on the Nasdaq Capital Market in the context of our IPO, given that: - the CSRC currently has not issued any definitive rule or interpretation concerning whether offerings like ours under this annual report are subject to this regulation; and - we are not controlled by mainland China companies or individuals. However, our PRC legal counsel Jingtian & Gongcheng has advised us that no detailed interpretation has been published by competent government authority with respect to the M&A Rules in the context of an overseas offering and our opinions summarized above are subject to any new laws, regulations and rules or detailed implementations and interpretations in any form relating to the M&A Rules. We cannot assure you that relevant PRC governmental agencies, including the CSRC, would reach the same conclusion as we do. If it is determined that CSRC approval is required for any future securities offerings, we may face sanctions by the CSRC or other PRC regulatory agencies for failure to seek CSRC approval. These sanctions may include fines and penalties on our operations in mainland China, limitations on our operating privileges in mainland China, delays in or restrictions on the repatriation of the proceeds from any future offering into mainland China, restrictions on or prohibition of the payments or remittance of dividends by our PRC Subsidiaries or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our Ordinary Shares.

Our contractual management rights are critical to our operations as we must acquire the rights from the village committees in order to harvest the tea leaves from the tea gardens. In mainland China, all land lots are owned by the State or under the collective ownership of village farmers, but the forest rights of the land lots thereon can be transferred or leased to entities or individuals in accordance with PRC laws and regulations. Our forest rights were obtained from the village committees who own the land lots or were provided with the forest rights. We do not own title to the land lots but rather usage right of the land lots. The contractual management rights we obtained pursuant to our contractual management rights agreements have a term of 30 years. There is no assurance that we can renew our existing contractual management rights agreements upon expiry, or that we will always obtain or maintain our contractual management rights due to the continued development of PRC forestry policies. Without contractual management rights, we will not be able to cultivate and harvest the tea leaves from the tea gardens situated on the land lots. In addition to our contractual management rights, all of our operations are subject to different national, provincial and local government policies and regulations. Significant regulatory changes in the PRC, including but not limited to, changes in applicable environmental legislation and regulations, tax policies, or any conditions attached to any of our certificates, permits or licenses may have a material adverse effect on our business, financial condition, and results of operations.

As a manufacturer of agricultural products intended for direct human consumption, we are subject to extensive governmental laws and regulations in relation to food safety in the PRC. For instance, the food safety laws in the PRC require enterprises engaged in the production and sale of food to obtain permits, failing which the Company may be subject to penalties including but not limited to confiscation of illegal income, the food illegally produced or dealt in, and the tools, equipment, raw materials, and other items used for illegal production or trade, imposition of fines not less than RMB100,000 but not more than RMB150,000 if the goods value of the food illegally produced or dealt in is less than RMB10,000 or a fine of not less than 15 times but not more than 30 times of the goods value if the goods value is RMB10,000 or above, revocation of food production licenses and, in more extreme cases, criminal proceedings may be initiated against the management. Our previous food production license obtained by Fujian MDH expired in June 2022 and consequently, refined tea has not been produced by Fujian MDH thereafter. On March 7, 2023, Fujian MDH has obtained a new food production license, which remains valid from March 7, 2023, to March 6, 2028. Fujian MDH is currently producing refined tea after obtaining the renewed food production license. However, failure to obtain or renew such licenses, or comply with food safety laws in the PRC may result in fines based on the related goods' value, suspension of operations, loss of food production or operation licenses and, in more extreme cases, criminal proceedings against us and our management pursuant to the PRC Food Safety Law and other applicable laws and regulations. Any of these events may have an adverse impact on our production, business, results of operations and financial condition. There can be no assurance that the PRC government will not impose additional or stricter laws or regulations on food safety in the future, providing for stricter and more comprehensive monitoring and regulation of food manufacturers in areas including, but not limited to, food production and distribution, which may lead to an increase in our costs of complying with such regulations. We may be unable to pass these additional costs on to our customers, which may result in an adverse effect on our results of operations. The tea gardens we operate are in mainland China and the land lots where such tea gardens are situated are subject to significant PRC regulations. Regulatory changes may adversely affect such tea gardens, our forest rights, and our business, financial condition, and results of operations.

The General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the "Opinions on Severely Cracking Down on Illegal Securities Activities According to Law," or the Opinions, which was made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of mainland China-concept overseas listed companies, and laws and regulations in relation to cybersecurity and data privacy protection requirements and similar matters will be revised. On February 17, 2023, the CSRC released the Trial Administrative Measures and relevant supporting guidelines, which came into force on March 31, 2023. The New Administrative Rules Regarding Overseas Listings regulate both direct and indirect overseas offering and listing of mainland China domestic companies' securities by adopting a filing-based regulatory regime. Pursuant to the Trial Administrative Measures, where an issuer submits an application for initial public offering to competent overseas regulators, such issuer must file with the CSRC within three business days after such application is submitted. If an issuer offers securities in the same overseas market where it has previously offered and listed securities, filings shall be made with the CSRC within 3 working days after the offering is completed. The Trial Administrative Measures also require subsequent reports to be filed with the CSRC on material events, such as change of control or voluntary or forced delisting of the issuer(s) who have completed overseas offerings and listings. On February 17, 2023, the CSRC also issued the Notice on Administration for the Filing of Overseas Offering and Listing by Domestic Companies, or the Overseas Offering Administration Notice, pursuant to which, on or prior to the effective date of the Trial Administrative Measures, domestic companies that have already submitted valid applications for overseas securities offering and listing but have not obtained approval from overseas regulatory authorities or stock exchanges may arrange the timing for submitting their filing applications with the CSRC in a reasonable manner, and must complete the filing before the completion of their overseas securities offering and listing. Pursuant to the Trial Administrative Measures and the Overseas Offering Administration Notice, we were required to complete the filing procedures with the CSRC before completion of our initial public offering. Any failure by us to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to offer or continue to offer our Ordinary Shares. We submitted the required filing to the CSRC on September 6, 2023. On January 24, 2024, we received the filing notice from the CSRC in relation to our overseas offering and listing, which indicates that we have completed the required filing application procedures for our initial public offering. For future offerings, we are required to submit a filing with the CSRC within three business days after the completion of an offering and may be subject to the filing requirements under the New Administrative Rules Regarding Overseas Listings for our future offerings and listing of our securities in an overseas market under the New Administrative Rules Regarding Overseas Listings. On February 24, 2023, the CSRC, together with Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing which was issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009, or the Provisions. The revised Provisions is issued under the title the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies and became effective on March 31, 2023. One of the major revisions to the revised Provisions is expanding its application to cover indirect overseas offering and listing to be consistent with the Trial Administrative Measures. The revised Provisions provide, among others, that (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. On December 28, 2021, the CAC, jointly with the relevant authorities, formally published Measures for Cybersecurity Review (2021) which took effect on February 15, 2022. Measures for Cybersecurity Review (2021) stipulates that operators of critical information infrastructure purchasing network products and services and online platform operators carrying out data processing activities that affect or may affect national security, shall conduct a cybersecurity review. Any online platform operator who controls more than one million users' personal information must go through a cybersecurity review by the cybersecurity review office if it seeks to be listed in a foreign country. Since our business does not rely on the collection of user data or implicate cybersecurity and we do not possess more than one million users' individual information, we believe that we are not subject to a cybersecurity review to issue our Ordinary Shares or list and trade of our Ordinary Shares on Nasdaq under the Measures for Cybersecurity Review (2021). There remains significant uncertain, however, as to how the Cybersecurity Review Measures will be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the Cybersecurity Review Measures. Furthermore, the PRC government authorities may further strengthen oversight and control over offerings that are conducted overseas and/or foreign investment in mainland China-based issuers like us. Such actions taken by the PRC government authorities may intervene or influence our operations at any time, which are beyond our control. Therefore, any such action may adversely affect our operations and significantly limit or hinder our ability to offer or continue to offer securities and reduce the value of such securities. As of the date of this annual report, we and our PRC subsidiaries have not been involved in any investigations on cybersecurity review initiated by the Cyber Administration of China or related governmental regulatory authorities and have not received any requirements to obtain permissions from any PRC authorities to issue our Ordinary Shares to foreign investors or were denied such permissions by any PRC authorities. We submitted the required filing relating to the IPO to the CSRC on September 6, 2023. On January 24, 2024, we received the filing notice from the CSRC in relation to our overseas offering and listing, which indicates that we have completed the required filing application procedures for the IPO. Given the current PRC regulatory environment, it is uncertain when and whether we or our PRC Subsidiaries, will be required to obtain additional permissions from the PRC government to list on U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied or rescinded. As of the date of this annual report, we believe we are in compliance with the above-mentioned regulations or policies that have been issued by the CAC and the CSRC in all material aspects. We have been closely monitoring regulatory developments in mainland China regarding any necessary approvals from the CSRC or other PRC governmental authorities required for overseas listings.

The PRC government has significant authority to exert significant oversight and control over our operations in mainland China. Therefore, the interpretation and enforcement of PRC laws and regulations could limit the legal protection available to you and us, hinder our ability to offer or continue to offer our Ordinary Shares, result in a material adverse effect on our business operations, and damage our reputation, which might further cause our Ordinary Shares to significantly decline in value or become worthless. Changes in China's economic, political or social conditions, or government policies could materially and adversely affect our business, financial condition, and results of operations. The economic, political and social conditions in the PRC differ from other countries in certain respects, including structure, government involvement, level of development, growth rate, foreign exchange control, capital reinvestment, allocation of resources, rate of inflation and trade balance position. Before the adoption of its reform and opening up policies in 1978, the PRC was primarily a planned economy. In recent years, the PRC government has been reforming the PRC economic system and government structure. For example, the PRC government has implemented economic reform and measures emphasizing the utilization of market forces in the development of the PRC economy in the past three decades. These reforms have resulted in significant economic growth and social prospects. Economic reform measures, however, may be adjusted, modified or applied inconsistently from industry to industry or across different regions of the country. The PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also has significant impact over China's economic growth by allocating resources, regulating payment of foreign currency-denominated obligations, setting monetary policies, regulating financial services and institutions, and providing preferential treatment to particular industries or companies. While the PRC economy has experienced significant growth in the past four decades, the rate of growth has been different, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall PRC economy, but may also have a negative effect on the operating entities or us. We cannot predict whether the resulting changes will have any adverse effect on our current or future business, financial condition or results of operations. Despite these economic reforms and measures, the PRC government continues to play a significant role in regulating industrial development, allocation of natural and other resources, production, pricing and management of currency, and there can be no assurance that the PRC government will continue to pursue a policy of economic reform or that the direction of reform will continue to be market friendly. Our ability to successfully expand business operations in the PRC depends on a number of factors, including macro-economic and other market conditions. Demand for our future products in the Chinese market and our business, financial condition and results of operations may be materially and adversely affected by the following factors: - changes in political or social conditions of the PRC;- changes in laws, regulations, and administrative directives or the interpretation thereof;- measures which may be introduced to control inflation or deflation; and - changes in the rate or method of taxation. These factors are affected by a number of variables which are beyond our control. The promulgation of new laws or regulations, or the new interpretation of existing laws and regulations, in each case that restrict or otherwise unfavorably impact the ability or manner in which we conduct our business and could require us to change certain aspects of our business to ensure compliance, which could decrease demand for our products, reduce revenues, increase costs, require us to obtain more licenses, permits, approvals or certificates, or subject us to additional liabilities. To the extent any new or more stringent measures are required to be implemented, our business, financial condition and results of operations could be adversely affected as well as materially decrease the value of our Ordinary Shares.

Our operating subsidiary is incorporated under and governed by the laws of the PRC. The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general, such as foreign investment, corporate organization and governance, commerce, taxation, and trade. As the significant part of our business is conducted in mainland China, our operations are principally governed by PRC laws and regulations. However, since the PRC legal system continues to evolve rapidly, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties, which may limit legal protections available to us. Uncertainties due to evolving laws and regulations could also impede the ability of a mainland China-based company, such as our company, to obtain or maintain permits or licenses required to conduct business in mainland China. In the absence of required permits or licenses, governmental authorities could impose material sanctions and penalties on us. In addition, some regulatory requirements issued by certain the PRC government authorities may not be consistently applied by other PRC government authorities (including local government authorities), thus making strict compliance with all regulatory requirements impractical, or in some circumstances impossible. For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by law or contract. However, since PRC administrative and court authorities have discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to predict the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not publicly published on a timely basis or at all and may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, could materially and adversely affect our business and impede our ability to continue our operations. The PRC government has significant oversight and discretion over the conduct of our business and may intervene or influence our operations as the government deems appropriate to further regulatory, political, and social goals. The PRC government has published new policies that significantly affect certain industries such as the agricultural industry, and we cannot rule out the possibility that it will in the future release regulations or policies regarding our industry that could adversely affect our business, financial condition, and results of operations. Furthermore, the PRC government has recently indicated an intent to exert more oversight and control over securities offerings and other capital markets activities that are conducted overseas and foreign investment in mainland China-based companies like us. Any such intervention in or influence on our business operations or action to exert more oversight and control over securities offerings and other capital markets activities, once taken by the PRC government, could adversely affect our business, financial condition and results of operations and the value of our ordinary shares, or significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or in extreme cases, become worthless.

The PRC Foreign Investment Law, or the FIL, was enacted by the National People's Congress of the PRC on March 15, 2019, and became effective on January 1, 2020. The FIL replaced the trio of existing laws regulating foreign investment in mainland China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino- foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. This law has become the legal foundation for foreign investment in the PRC. The FIL embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. However, uncertainties exist with respect to interpretation and implementation of the FIL, which may adversely impact on our corporate governance practices and increase our compliance costs. For instance, we might be required by governmental interpretations or implementing rules of the FIL to adjust the corporate governance of our PRC Subsidiaries in a five-year transition period. In addition, the FIL imposes information reporting requirements on foreign investors or foreign invested enterprises. Failure to take timely and appropriate measures to cope with any of these or other regulatory compliance requirements under the FIL may lead to rectification obligations, penalties, or other regulatory sanctions on us.

Substantially all of our revenues are earned by our PRC Subsidiaries. However, PRC regulations restrict the ability of our PRC Subsidiaries to make dividend and other payments to its offshore parent company. PRC legal restrictions permit payments of dividends by our PRC Subsidiaries only out of its accumulated after-tax profits, if any, determined in accordance with Mainland China accounting standards and regulations. Our PRC Subsidiaries are also required under PRC laws and regulations to allocate at least 10% of its annual after-tax profits determined in accordance with Mainland China GAAP to a statutory general reserve fund until the amount in such fund reaches 50% of our PRC Subsidiaries' registered capital. Allocations to these statutory reserve funds can only be used for specific purposes and are not transferable to us in the form of loans, advances, or cash dividends. Any limitations on the ability of our PRC Subsidiaries to transfer funds to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends and otherwise fund and conduct our business. In addition, to the extent that our cash or/or other assets are held in our PRC subsidiaries or our Hong Kong subsidiary, we face a risk that the PRC government may impose new restrictions or limitations on, or may directly intervene to prevent, the transfer of such funds or assets outside of Mainland China or Hong Kong. In that event, our cash and assets, which are held primarily in our PRC Subsidiaries, may become unavailable to fund operations or for other uses outside of Mainland China or Hong Kong.